Keynes Philosophical Approach To Policy

Keynes's Philosophical Approach to Policy

Policy combines theory with normative judgments. Understanding the Keynesian revolution, therefore, requires a consideration of the general philosophical views of economists at the time, and of Keynes in particular. Keynes was not a radical, although he was accused of being one after publishing The General Theory. We would hardly expect a person of his background, education, and experience to argue for drastic changes in the institutional structure of his society. Keynes was basically conservative in his views about altering the structure of society, generally advocating only such changes as would preserve the essential elements of capitalism. His view was that if the worst defects of the system were not removed, individuals would discard the capitalistic system and lose much more than they gained. His rejection of Marxism reflects both a criticism of Marx's economics and a recognition that a Marxian social system would destroy the social class of which Keynes himself was very much a part:

How can I accept a doctrine which sets up as its bible, above and beyond criticism, an obsolete economic textbook which I know to be not only scientifically erroneous but without interest or application for the modern world? How can I adopt a creed which, preferring the mud to the fish, exalts the boorish proletariat above the bourgeois and the intelligentsia who, with whatever faults, are the quality in life and surely carry the seeds of all human achievement?

Keynes was dismayed by the growth of totalitarian government and dictator­ship in Germany, Italy, and Russia. He was willing to admit that these changes in social organization might solve some economic problems, but such a solution, he felt, would be purchased only at the cost of individualism and its economic and political advantages. The economic advantages of individualism, stemming from the use of self-interest to achieve greater efficiency and innovation, are well known to economists:

But, above all, individualism, if it can be purged of its defects and its abuses, is the best safeguard of personal liberty in the sense that, compared with any other system, it greatly widens the field for the exercise of personal choice. It is also the best safeguard of the variety of life, which emerges precisely from this extended field of personal choice, and the loss of which is the greatest of all losses of the homogeneous or totalitarian state.

Keynes's broad philosophical views on the structure of the good society led to attacks from two sides. Those to the left of him considered him an apologist for capitalism and for his own class, and those to the right regarded him as a wild-eyed reformer-socialist seeking to dismantle the capitalistic system. We have already seen his response to the Marxist approach. His response to criticism from the right was at least more conciliatory. He wrote, "While, therefore, the enlargement of the functions of government. . . would seem ... to be a terrific encroachment on individualism, I defend it, on the contrary, both as the only practicable means of avoiding the destruction of existing economic forms in their entirety and as the condition of the successful functioning of individual initia­tive."17 Keynes found one of the chief benefits of capitalism to be the free play it gives individualism. What abuses do come from individualism, he believed, could be corrected without destroying capitalism. The chief defects or faults of capitalism, he said, "are its failure to provide for full employment and its arbitrary and inequitable distribution of wealth and incomes."

The Depression of the 1930s convinced many economists that the failure to provide full employment was a major fault of capitalism. An important question faced by postwar economists was this: What policies can we use to preserve the best of capitalism and simultaneously prevent major depressions? Keynes's views on policy seemed at first too liberal for many people in the United States. The monetary and fiscal policy suggested by the Keynesians were finally embraced by U.S. economists, because they required little direct government intervention in the economy. Those policies, however, were attacked by some who considered Keynesians socialists. Lorie Tarshis, who wrote the first Keynesian introductory textbook, discovered this when a conservative group led a drive to stop alumni from giving to any school that used his book and to have him fired from Stanford University, where he taught. Tarshis's introductory textbook was not commer­cially successful, but it was followed by Samuelson's text, which was extremely successful and widely imitated, in part because it cloaked Keynesian economics in a scientific mantle, thereby avoiding the ideological attacks leveled against Tarshis.